By now, it’s no secret that this country is awash in student debt. In fact, by the time 2012 gets here, we’re scheduled to owe a total of $1 trillion in student loans. And while figures like that have prompted some murmurings of concern, we still seem to be engaging in the same activities that led us up to our eyeballs in educational loans.

Recent investigations into the matter have focused primarily on for-profit universities, including the University of Phoenix and other schools that have campuses around the country and offer online classes to those who aren’t near a learning center.

The latest of these investigations, undertaken by Congressman Elijah Cummings (D – MD), highlights some of the shocking numbers associated with for-profit education:

• The University of Phoenix (the largest for-profit university in the country) gets 88 percent of its funding from the federal government. This money comes as various grants, loans, and veterans’ benefits that students of the university apply for and use to cover the cost of classes.
• More than 20 percent of the school’s students default on their loans.
• The chairman of the company that operates the University of Phoenix earned $6.5 million last year (including bonuses and stock options with his salary).

According to sources, these figures are typical of the for-profit education industry. And what’s really alarming for students and potential students who might enter the for-profit education system is that student loans are almost impossible to discharge in bankruptcy.

Further, studies have shown that six-year graduation rates for first-time bachelor’s students at for-profit colleges are abysmally low: about 22 percent for those who attend physical classes, and as low as five percent for those taking classes online.

In other words, the majority of those enrolled in these programs are accumulating student debt without earning the degree that could boost their income in their life after school. This, of course, makes repaying student loans that much more difficult.

Questionable Enrollment Tactics

Congressman Cummings has sent letters to the heads of several for-profit institutions, detailing the financial imbalances mentioned above and mentioning other problems that undercover investigations have revealed at such institutions.

In brief, the pushy and aggressive (and sometimes deceptive) sales tactics used to get new students to enroll at for-profit universities mimic those used by unscrupulous debt settlement firms and subprime mortgage lenders.

Unfortunately, as is often the case with other areas of finance, most of the consumers of for-profit education are not fully aware of the potential financial repercussions their decision to take on student loans might have.

Hopefully, Congressman Cummings will remain vigilant about this matter. He has requested a response from the education executives before the end of this month.

Bankruptcy filing statistics suggest that medical debts contribute to about 60 percent of bankruptcy filings in the U.S. That’s one reason that many Americans are eagerly awaiting the Supreme Court’s decision on a lawsuit involving payment of medical bills. Here’s the background you need to know.

Background: How Medicaid Works

The case before the Supreme Court involves a challenge to Medicaid, a healthcare system that requires the federal government to provide funding to states to subsidize medical care for elderly, low-income, and disabled citizens.

Federal support, in most states, accounts for the majority of Medicaid funds. States that choose to enact Medicare programs must agree to certain terms laid out by the federal government, one of which is paying enough to healthcare workers that they can afford to provide needed care.

California Cuts Challenged

Despite those laws, California, in efforts to balance its budget in 2008 and 2009, cut Medicaid funding by close to 10 percent in some cases. This was problematic because:

• California did not submit its cuts to the federal government for approval before passing them into law.
• When the cuts were sent in, federal officials denied them for not providing adequate funding to doctors and other healthcare providers.
• Despite federal opposition, California enforced the cuts and now faces a lawsuit brought by hospitals, doctors, and patients.

Everyone who participates in Medicare and Medicaid stands to lose if the California cuts are permitted to go through:

• Doctors would be paid less for their work and may have to turn away patients on Medicaid because treating them would mean operating at a loss.
• Hospitals could lose serious money on performing certain procedures for patients on Medicaid because state reimbursement for those procedures might not be sufficient to cover their costs.
• Patients on Medicaid risk losing access to medical care, because doctors and hospitals may turn them away for fear of non-payment or insufficient payment from the Medicaid system. As it is, sources report that more than half of California’s Medicaid patients (56 percent) cannot find medical care because of reimbursement problems at the state level.

Should the Case Even Be in Court?

In addition to the issue of whether or not the California Medicaid cuts are legal is the issue of whether or not this dispute belongs in the court system. The Obama Administration and California Governor Jerry Brown’s administration have apparently contended that the funding of Medicaid is an issue for the state to figure out on its own, without help from the federal court system.

On the opposite side, the lawyer representing the plaintiffs in the suit has reportedly said that California failed to show how it considered the interests of all parties in its funding cut decision. Rather, he claims, the state simply tightened its purse strings without following correct procedures.

The Supreme Court’s decision could impact the future of Medicaid recipients in California and possibly around the country.

One provision of the consumer protection laws passed in 2009 was the creation of the Consumer Financial Protection Bureau, a government body designed to act in the best interest of American consumers. The CFPB is slated to officially begin its work this summer.

Here’s a look at where the bureau stands and what to expect from it in the future.

Executive Controversy

Before it became officially active, the CFPB was headed by Harvard Law Professor Elizabeth Warren, whom Obama appointed after the agency’s creation. Warren was regarded by many as the likely candidate to head the CFPB when it officially started business, but Obama has nominated instead Richard Coudray, Ohio’s former attorney general.

Still, some lawmakers have vowed that they will not confirm Cordray (or any candidate) as head unless the CFPB’s powers are scaled back.

Planned Consumer Protections

Despite an unfriendly right wing, the CFPB has moved forward with its planned protections, according to a progress report it released on July 18. Here’s a look at what this agency has cooking.

• “Know before You Owe:” This project involves simplifying the forms that explain the terms and conditions of mortgages to consumers. The all-too-recent housing market collapse reinforced a message many consumer advocates had been communicating for years: we need to make the mortgage borrowing process more straightforward.
• Transparency in credit cards: While the Credit CARD Act made strides toward improved credit card transparency, the CFPB still sees room for improvement. Its plans for making plastic more consumer-friendly are not yet clear, but the issue is high on the agency’s agenda.
• Credit score report: Right now, there’s some variation among the credit scores that consumers and lenders can purchase from the various credit reporting bureaus. The financial reform bill called for the CFPB to study why these differences occur and compose a report on suggested changes.
• Supervision of non-bank financial entities: Currently, financial oversight laws are in charge largely of banks. Other financial entities (like debt collectors, debt relief services, payday lenders, etc.) face little centralized regulation. The CFPB could pass rules that other companies in the finance world must follow.
• Training and workforce development: Another one of the CFPB’s future duties will be examining the workforce and devising a plan that would better prepare Americans for the jobs that need to be filled. Ideally, this measure would provide long-term solutions to unemployment problems by outlining the training and skill base that Americans need to complete the jobs that the country currently has to offer.

It’s unclear at this point how long it might take for Congress to approve the CFPB’s nominated leader, or if the Obama Administration will give in to calls for a board instead of a sole leader. But clearly, the bureau isn’t waiting around to start taking necessary action.

The Credit Card Accountability, Responsibility and Disclosure Act (commonly referred to as the Credit CARD Act) passed in 2009 has been lauded as a big step forward for consumer rights. After all, the law took aim at many unsavory practices that had become common on the part of credit card issuers.

But, despite the lawmakers’ best intentions, some of the law’s provisions haven’t been explained with complete clarity in the media. Here’s a look at some important legal loopholes that might affect your next credit card statement.

Balance Increase Notices

Before the passage of the Credit CARD Act, issuers were, in many cases, allowed to increase interest rates arbitrarily and apply the increased rate to all balances on a user’s account. Rate increases can make a small amount of debt snowball and led many a consumer to the bankruptcy court.

The CARD Act changed that – sort of. Now, credit card issuers must issue notice of rate increases 45 days before that change takes effect. BUT:

• The 45-day rule applies to payments: In other words, a credit card issuer must give a consumer notice of a rate increase 45 days before the consumer is required to make the first payment at the new rate.
• Increases applied to purchases start sooner: The law actually permits credit card issuers to begin applying the increased rate to purchases made as soon as 14 days (two weeks!) after the postage date on the notification about the rate increase.

In other words, a consumer has a two-week window after a notice of increase of rate is mailed before purchases on the credit card start coming with an amped-up interest rate. In many explanations of the law’s provisions, this is ignored or misrepresented.

Retroactive Rate Increases

Another much-applauded change the CARD Act introduced was the outlawing of retroactive interest rate increases (that is, of an issuer applying a raised interest rate to balances accumulated before the rate changed).

But in reality, the new law only prohibits retroactive hikes in certain situations. Some exceptions to the rule allow rate hikes for existing purchases.

• Late payments: If a rate increase is triggered by a payment that is 60 or more days late, the card issuer can apply the increased rate to all balances on a consumer’s card.
• Other increases: For the most part, other retroactive increases are prohibited. However, if you’re worried about rate increases, be sure to read any mail regarding your credit card carefully.

Credit Cards & Bankruptcy

It’s no secret that many bankruptcy filers need the court’s protection because they’re overextended on credit. And credit cards are an easy way to take on more debt than you can afford to pay back.

Bottom line: Read your credit card agreements carefully. If there’s any language you’re unclear about, call your bank and ask for an explanation.

In 2009, the passage of the Credit Card Accountability Responsibility and Disclosure Act (Credit CARD Act) introduced a bevy of new protections for consumer credit cards. But, as many news outlets are noting now, the bill did not provide the same protections for all credit cards.

Specifically, business cards do not enjoy some of the protections that consumer-designated cards do. Here’s why that might be a problem.

Business Credit Cards Owned by Individuals

• Individuals with small business credit cards: Sources note that many business credit cards are marketed to individuals and families and that many American households have business credit cards in their lineup.
• Business cards not covered by CARD Act: Because business transactions are not subject to the Truth in Lending Act, regulators did not include business credit cards under the umbrella of the CARD Act’s protections. The reasoning here was that businesses are generally better able to judge borrowing risks than individuals and so don’t need the same regulations in place.
• Millions of non-business offers: In the last five years, sources indicate that business card issuers have bombarded 12 million American households with as many as 44 million business card offers per month. Just to clarify, that’s households, not business addresses. Some of these addresses could be for individuals who work from home and/or have businesses based in their houses; others may not fit that bill.

Protections Business Cards Don’t Have

The Credit CARD Act limited the following exclusively for individual (not business) credit cards:

• Retroactive interest rate increases: This practice, while no longer allowed for typical consumer credit cards, is still permitted for business cards, which could leave unprepared borrowers on the hook for more money than they were initially responsible for paying. This practice can make a reasonable debt into a difficult mountain to climb.
• Over-limit fees: These fees hit card users when they charge more than their card’s limit. While individual cards might simply deny the transaction, business cards can still permit the purchase but charge a hefty fee.
• Other cost-changing practices: The other protections put in place by the Credit CARD Act (like advance notice of term changes, “summary boxes” of debt and payment terms and others) are not guaranteed on business cards.

Considerations if You Have a Business Card

If you have a business credit card, it’s probably a good idea to take a look at the contract you signed to make sure you’re aware of the terms and conditions. You may also want to apply for a non-business card to use as your primary tool of transaction (though it may benefit your credit score to keep the business card open).

Part of the financial overhaul legislation that went into effect last year was the introduction of a new government agency, the Consumer Financial Protection Bureau. The CFPB is designed to act as a watchdog for the finance industry and financial institutions, acting in the best interest of American consumers.

While the CFPB will not officially begin its work until July of this year, framers appointed by President Obama, including former Harvard bankruptcy professor Elizabeth Warren, have been developing and planning the bureau for some time. But now, it seems, Republican lawmakers are making noise about the Bureau and are attempting to limit the CFPB’s powers of oversight. Here’s why.

What the CFPB Is Designed to Do

The CFPB was created in response to the economic fallout linked to the questionable lending practices that touched off the Great Recession. Its stated goals include:

• Regulate consumer financial products and services: Making sure lenders, banks and other parts of the financial industry adhere to laws and rules is one major responsibility of the CFPB.
• Report to various committees: Twice a year, the CFPB must make a report to committees concerned with financial services and products in the House and Senate.
• Track consumer complaints: The CFPB will offer a toll-free hotline for consumer complaints once it’s up and running later this year.
• Conduct research: In order to better serve the public, the CFPB will study what areas are proving problematic for American consumers and investigate possible solutions.
• Promote financial literacy: Generally speaking, the CFPB will undertake the task of improving knowledge and understanding of financial products and services among American consumers.

Why Some Lawmakers Want to Limit the CFPB’s Power

Most of the jobs identified for the CFPB sound pretty innocuous if not downright helpful to the average consumer and/or consumer advocate. But Republican lawmakers in the House have proposed the following changes to the organization:

• Replace the CFPB’s head with a board of directors. Supporters claim that this move would decrease the chance of politicization of the bureau, but opponents suggest that a board would be more likely to be swayed by outside influence. Further, a group of people may be unable to reach consensus to implement strong reform.
• Require the CFPB to follow the appropriations process. This reform is allegedly meant to make sure money isn’t spent wastefully.
• Give greater power to federal bank regulators. This move would, according to supporters, keep the CFBP’s rules from “causing” a bank failure.

The reason these proposed changes have caused uproar from the media is that the financial crisis we’re still dealing with demonstrated a clear need for the CFBP; these changes could seriously limit its power to enact any significant change. And as a kicker, some sources note that the lawmakers behind these proposals are largely responding to money spent by the financial industry to undermine the CFPB’s effectiveness.

The Credit CARD Act, which took full effect earlier this year, is generally lauded as a victory for consumers (hooray!), but, despite its welcome protections, the law doesn’t mean we’re now fully protected against questionable practices by people who issue us plastic.

While the CARD Act includes many welcome reforms for debit and credit cards (including a limit to abusive overdraft loans), its protection is far from total. It may have expanded our rights as consumers, but it didn’t create a bubble of consumer safety around all credit products.

This post about understanding gift cards from Mint.com offers an important reminder about just costly some cards can be. Here’s a summary of what you need to know if you’re thinking about giving gift cards this year – or if you have some parked in your wallet.

Spend Your Money Wisely

Sources note that, as a nation, we drop about $87 billion on gift cards every year – and far too much of that money never goes to actually making purchases. Here’s a primer on what the CARD Act requires from gift card issuers.

• Expiration limits: The new limits on expiration dates state that a gift card cannot expire earlier than five years after its purchase. You may want to mark this date on any cards you buy.
• Fee limits: Card issuers can only impose fees on unused cards after they have been idle for a full year; further, such fees can only be charged once per month. Also, card issuers are prohibited from charging replacement fees for lost or stolen cards.
• Fee disclosures: Somewhere on the card or its packaging, all fees must be detailed in full.

This is all good news, but keep in mind that reloadable plastic cards (which are often non-gift items) are not covered, and neither are promotional gift cards.

Watch Out for Bankruptcy Filings

The other tricky thing to consider if you’re buying gift cards is the financial state of the company. In many cases, if a company files for bankruptcy or goes out of business, its gift cards are no longer valid. And, according to sources, this can be a big deal: it seems Sharper Image’s customers had about $20 million in unused gift cards when it went under.

A License to Overspend?

We all know that one of the most important parts of maintaining financial health is saving money when we can by bargain shopping. But, according to Mint.com, when we shop with gift cards, we’re 2.5 times more likely to pay full price than when we’re paying with cash.

This is understandable, but can be frustrating for budget-conscious folks. So remember: an informed consumer is a better consumer. Spend well!

The Senate is about to take on the Helping Families Save Their Homes Act, which is a bill that aims to potentially save 1.7 MILLION homes from foreclosure.

Take 30 seconds to e-mail your senators to say you support the bill.

Think it doesn’t affect you? Think again–this bill could also help preserve more than $300 BILLION in home equity of neighbors who would have to deal with foreclosed houses littering their neighborhood.

Among other initiatives, the bill aims to set in place protections that:

• Allow families to reduce their monthly mortgage payment to 31 percent or less of their income
• Open up refinancing options
• Reduce the loan principle on a home to the fair market value
• Reduce high mortgage loan interest rates

Passage of this bill could mean families get to stay in their homes and banks get paid more than they would have if the home entered foreclosure ~ Sounds great, huh?

But the bill is missing one thing: your support.

Click here to tell your senators and President Obama that you support the bill and you don’t want to see families affected by the recession kicked out on the street.

Pass this on to your friends and family too.

We need everyone to tell their senators they support this bill, but we especially need people in the following states to take immediate action:

• Arkansas
• Delaware
• Florida
• Georgia
• Indiana
• Louisiana
• Maine
• Missouri
• Montana
• Ohio
• Pennsylvania
• West Virginia

Send and e-mail now to your elected officials expressing your support ~ it takes no time, is already written and is fast to fill out!

Put democracy to action and take 30 seconds to e-mail your senators right now. Don’t wait to file bankruptcy to stop foreclosure. Take action now!

It’s muddy work to keep up with a bill as it winds through legislation.

But it’s worth the slog when it’s as important as the Cram Down Mortgage Legislation.

To recap: Sen. Dick Durbin (D-IL) introduced a bill that would give bankruptcy judges the power to change the terms of your mortgage. A judge could lower your interest rate or even decrease the principal you owe. If passed, this bill could help thousands, maybe even millions, of people facing foreclosure stay in their homes.

If you are struggling to make your mortgage payments this law could be a revelation. It address two majors causes of the recent foreclosure crisis: Skyrocketing interest rates due to adjustable rate mortgages and declining homes values.

However, most banks and credit unions oppose the new law. Legislative magazine Roll Call reports that the groups have been “dragging their feet” on working on a new compromise.

But today Roll Call reports that Sen. Durbin continues to push for a compromise that will work, and an announcement on a breakthrough could come as early as tonight.

Citigroup already agreed to new terms, but Wells Fargo, Bank of America and the Morgage Bankers Association continue to oppose the law.

In the latest round of talks, other banking items have been added to help the banks, including reduced FDIC fees.

We’ll keep you posted as any news on this law breaks.

The first step toward organized bills is prioritizing your expenses.

If you’re struggling to pay bills and you’re barely making it paycheck-to-paycheck–you’ve got to cut to the bare bones. This list suggests an appropriate order pf importance for most people:

• Necessities (shelter, food, medication): If you haven’t got a place to live or anything to eat, other expenses hardly matter. Make sure you funnel money to mortgage/rent and groceries before anything else.
• Essential Utilities: You need water, heat and electricity. You don’t need high-speed Internet, a deluxe cable package or even an energy-guzzling flat screen. If you need to cut costs, consider dropping some luxuries to save for the basics.
• Transportation: Whether you get around in your own car or on public transit, you need to make sure you budget for travel costs: without transportation, you probably can’t work, which means no bills will get paid. Downsizing to a less-expensive vehicle or taking the bus on occasion may help you save money here.
• Child Support or Alimony: If you’re obligated to pay such expenses, you should make sure you do: missing maintenance and support payments can land you in jail, not just trouble with your creditors.
• Taxes: The government could seize your property if you fail to pay taxes; make sure you avoid this by placing taxes next on the list.
• Student Loans: These fall lower on the list, particularly if collection attempts have been neither made nor threatened.
• Unsecured Loans: Credit card bills, payments for services and even loans from friends should fall last on your priority list, partly because your creditors can’t seize any property if you don’t pay and partly because these are the most likely to be discharged should you file for bankruptcy.

Getting Organized

Once you know what needs to be paid, consider developing a system to help you remember to make regular, timely payments. This could include a variety of options, including:

• Automatic Online Payment: Some services can link to your checking account. This may work if you’re confident you’ll have enough in your account to cover costs.
• Color Coded Folders: Low-tech options like this allow you to see at a glance which bills are paid, unpaid and due soon.
• Digital Charts: Many computers and cell phones have programs that allow you to set reminders for yourself. Take advantage of them!
• Buddy System: If all else fails, enlist a friend: One of you is bound to remember when bill-paying time comes around each month.

But here’s the bottom line: use common sense and start living on less.

Are your bills out of control?  You may need to take serious action. Learn how filing bankruptcy may help.

There’s a foreclosure crisis, in case you didn’t notice.

Maybe you haven’t seen your neighborhood become a ghost town yet, but you’ve probably noticed your home is not worth what it used to be–it may not even be worth the money you owe on your mortgage.

The crisis affects us all.

Help for Homeowners

No one plans to become a distressed homeowner.

There’s a bill circulating in Washington and it could help many homeowners keep their homes.

It’s been passed in the House and is now being brought for a vote in the Senate, but some Senators are resisting the bill, essentially slapping struggling homeowners in the face–thanks to the diligent work of banking industry lobbyists.

Surprise: The Banking Industry Doesn’t Want it Passed

The banking industry lobby doesn’t care if you get to keep your home. In fact, it would probably rather you lose it than damage the mortgage industry’s bottom line.

Somehow, the industry believes it would lose more money by allowing homeowners to pay their mortgages than by continuing the expensive process of foreclosing on the homes and attempting to resell them in a bottomed-out and flooded market.

But S. 61, the bill that the lobby is fighting so hard to bury, would correct a flaw in the U.S. Bankruptcy Code and allow bankruptcy judges to modify mortgages and help homeowners.

What the Bill Would Do for Homeowners

The bill would help millions of homeowners, even those who never file bankruptcy.

The thing is, bankruptcy courts have the power to modify secured debts – with one major exception: they can’t modify home mortgages. This bill would correct that; however, if the lobby has its way, it won’t see the light of day.

Breaking Down this Housing Bill

If bankruptcy judges could reduce the balance of and reduce the interest on home loans, many people would not lose their homes to foreclosure.

If the mortgage company knew a distressed homeowner could file bankruptcy and have the terms of the loan modified, they would likely be more willing to negotiate and restructure loans without the homeowner filing bankruptcy.

Bottom line: The industry does not want to be forced into playing nice with homeowners.

If you think it would be a good idea for more families to stay in their homes, consider letting your Senator know that you support S. 61.

The voices of the lobbyists are being heard loud and clear; now it’s time for Americans to speak up on the issue.

You Can Make a Difference–Contact Your Senator

Find contact information for your Senator and let them know where you stand.

You can also call 877-354-4958 to voice your opinion.

Spread the word!

The House gave the green light for the housing act, which is hoped to help homeowners save their homes from foreclosure.

I applaud the House, as it passed legislation that supports the people of this country. It’s not perfect, but it’s a step in the right direction.

Banks and large corporations have been given enough. It’s time for the little guy.

Jim Puzzanghera wrote a great article in the Los Angeles Times that can give you some more information about the bill.

You can also read about how filing bankruptcy may save your home from foreclosure.

Every 13 seconds a foreclosure occurs.

Think it doesn’t affect you? Think again.

An increase in foreclosures can also mean:

• decreased revenue for city government
• spikes in crime
• increases in homelessness
• more weight on the struggling economy

You Can Help Stop The Foreclosure Epidemic

Judicial modification of mortgages in foreclosure could help folks save their homes.

Send an e-mail (it takes 15 seconds & it’s even written for you) and tell your elected officials that you want judicial modification of mortgages to be part of the housing crisis bill.

Don’t wait—word is that the bill is set to go to the House floor any day.

Filing Bankruptcy Can Also Stop Some Foreclosures

Did you know that Chapter 13 bankruptcy was designed to stop foreclosure? Learn more about filing bankruptcy…